China will demand automakers produce more energy-efficient cars in order to reduce fuel consumption, a senior engineer at China Automotive Technology & Research Center, which is drafting the new rules, told XFN-Asia, according to AFX News.

The engineer, who asked not to be named, said China will implement the new restrictions in two phases, the first one starting in July in 2005, and the second phase starting in January 2008.

Although he did not provide any details about the standards automakers will need to meet, he said most manufacturers of M1 passenger cars - passenger cars with a weight below 3.5 tons and up to nine seats - will be exempt from the first phase. However, he said that most M1 cars on the road today will not be able to meet the standards set for the second phase.

Automakers, however, will have sufficient time to engineer the necessary technology improvements on engines and transmissions prior to 2008, he said.

The report said the restrictions are likely to impact producers of fuel-hungry sports utility vehicles and benefit manufacturers of more economical sedans.